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Trump signs order to lower drug prices. Here are the details

“Putting America First,” the president orders HHS to create a model to purchase prescription drugs at “most-favored-nation” prices, but legal challenges are expected

President Donald Trump holds up a signed executive order on lowering drug prices, in the South Court Auditorium in the White House complex, Friday, July 24, 2020, in Washington.
Alex Brandon, Associated Press

SALT LAKE CITY — On Sunday, President Donald Trump announced he had “just signed” an executive order aimed at lowering prescription drug prices.

The order states that its “most-favored-nation” policy is intended to ensure the United States “should not pay more for costly Part B prescription drugs or biological products.”

Under his “Executive Order on Lowering Drug Prices by Putting America First,” Trump directs Health and Human Services Secretary Alex Azar to implement a model for Medicare to pay no more than most favored nation prices for “certain high-cost” drugs and biological products to see if a lower purchase price would “mitigate poor clinical outcomes and increased expenditures” related to expensive medications.

Why an executive order?

The president writes in the executive order that:

  • “It is unacceptable that Americans pay more for the exact same drugs, often made in the exact same places.”
  • “Americans should not bear extra burdens to compensate for the shortfalls that result from the nationalized public health care systems of wealthy countries abroad.”
  • “The need for affordable Medicare Part B drugs is particularly acute now, in the midst of the COVID-19 pandemic, which has led to historic levels of unemployment in the United States, including the loss of 1.2 million jobs among Americans age 65 or older between March and April of 2020.”

What is the most-favored-nation policy?

According to the World Trade Organization, the “most-favored-nation treatment” ensures WTO members cannot discriminate between trading partners.

In general, if a nation agrees to trading terms with another WTO member, that deal should be available to all members.

The Organization for Economic Cooperation — a global trade organization— defines the most-favored-nations clauses as “investment agreements by ensuring that the parties to one treaty provide treatment no less favorable than the treatment they provide under other treaties.”

But, there are several exceptions, according to the WTO. Among them are members discriminate against goods from outside the organization, provide developing countries “special access” to WTO member markets and they “can raise barriers against products that are considered to be traded unfairly from specific countries.”

In his executive order, Trump claims the U.S. government is the world’s “largest payer” of prescription drugs and is still charged a higher price than “wealthy countries abroad.”

When will Americans see lower prices?

Sunday’s executive order, which expands on a similar order ceremoniously signed order on July 24, would not immediately lower prescription drug prices, according to The New York Times. Enforcing Sunday’s order “could take months, if not longer” and is expected to face legal challenges, the Times reported.

The Wall Street Journal reported that the order does not authorize HHS to negotiate directly with drug companies, which drug-pricing experts say is the best way for Medicare to trim costs.

The administration had also considered the feasibility of issuing Medicare patients a one-time $100 coupon to around 25 million people this fall, Politico reported.

Stephen Ubl, president and CEO of pharmaceutical trade organization PhRMA, said the executive order was a “reckless attack” on drug companies developing treatments for the global pandemic. He said it would threaten American innovation and would “give foreign governments a say in how America provides access to treatments,” according to Politico.

“With scientists and researchers at America’s biopharmaceutical companies working around the clock to fight a deadly pandemic, it is simply dumbfounding that the Trump administration would move forward with its threat to import foreign price controls and the inevitable delays to innovation that will follow,” said Biotechnology Innovation Organization CEO Michelle McMurry-Heath, The Hill reported.

The politics

The president’s executive order, along with three others signed in July that target drug costs, “highlight his commitment to cutting prescription prices before the Nov. 3 presidential election,” according to Fox Business.

Favorability among the battleground demographic of older voters could be a key factor in determining either presidential candidate’s chances this fall.